Business and IS Performance(IS 6010)

MBS BIS 2010 / 2011

11th November 2010

Fergal Carton (f.carton@ucc.ie)Accounting Finance and Information Systems

Last week• Apple iTunes process new elements (talk with ATMac and HMV)

– Distribution points: Hinchley in the UK and TNT depots in Dublin, Cork

– Courier to customer directly for all Apple deliveries: packing and labelling?

– HMV sales data collected nightly, interface to Apple?

– Replenishment of HMV stores done centrally based on sales reported

• Notes on process mapping and assumptions• Accuracy and precision

– Accuracy is tellling the truth, precision is telling the same story over and over again

– Granularity is the level of detail required

• Virtualisation / integration and usefulness of information

– Finance need visibility of the road ahead, the dashboard and road behind

– Looking at screens instead of talking to people (getting the balance right)

– View of reality distorted by act of collecting data (eg. Zip codes for Ireland)

– Virtualisation introduces constraints on reporting

• Living with demand uncertainty, stretch performance targets

• Integration can result in greater dependence on manual data manipulation

This week• Decoupling point

• Control objectives of integration are undermined

• Integration framework

• Mason and Swanson framework for measurement and IS

• Research on impact of ERP on management decision making

Linking the physical to the virtual

• Use of systems to gain visibility of processes• Good data integrity is accurate and precise• What are the obstacles to data integrity?

– People purposefully (or not) getting data wrong)– Poor motivation– Poor training– Calibration of the tool

• Accuracy of data is driven by good design– Understanding of physical process

– Understanding of limitations of information system

• Gift card example highlights some obstacles

Decoupling point

• Decisions were made “intellectually”, “in the brain”, “on the fly”, “off-line” or “by the seat of the pants”.

• Such managerial observations represented the “decoupling point” where the physical and the virtual diverged.

• Information that was structured in a system was no longer adequate to support decision making.

Decoupling point• Inability of planners to deal with demand uncertainty, so

responsibility for make or break performance decisions was pushed downwards to operations managers

• Instead of the planning role protecting operations from fluctuations in demand, managers had to take personal risks in operational decision making (Planning, Buying, Making and Delivering)

• In so doing, managers were obliged to take control of the means of decision making, including the implementation and use of appropriate decision support tools.

• Hence the predominance of the “soft” vocabularly

Control objectives of integration undermined

Control

Centralisation Co - ordination

Integration

Granularity Accuracy / consistency

Inflexibility

Latency Manual

More analysis potential

Deteriorating data integrity

Technical skills required for reporting

Integration framework

Execute Schedule

Measure

Performance control

Supply Demand

Resourcevisibility

Physical

VirtualPlan

PlanPlan

Mason and Swanson, 1979 II• Managers require information about

resources and their relative effectiveness for achieving the organisation’s purpose

• Resources = people, materias, plant and equipment, money and information

• Managerial accounting systems– Resources and costs

– Relationship between costs and performance

Mason and Swanson, 1979 IV• Managers queries and alternatives

which govern the precision of the measure

• Precision of measure only to “discriminate between critical magnitudes”

• Use recruitment process to differentiate between primary and secondary data

Mason and Swanson, 1979 V• What problems shall I look into

(attention)?

• What course of action is better (solution)?

• How well am i doing (scorecard)?

• IS view of information accuracy (data intgegrity) obscures role of information as influential

Overlapping research domains

Centralisation

Integration

Decision Making

Standardisation

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Centralisation

Integration

Decision Making

Standardisation

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Overlapping research domains

Information characteristics

Information overload

Retrospective justification

Fragmentation of managerial attention

CentralisationFlexibility

Two in depth case studies

RQ1: organisational goals

• Performance goals are soft (flexible)

• ERP requires hard data for execution

• Uncertainty from demand fluctuations

• Dis-connect plannning from operations

• Creates buffer zone for decision makers

• Both cases disconnected MRP logic

RQ2: decision making

• Much time wasted on reconciliation

• Fragmentation of demand signals

• Coping with uncertainty impacts data

• Link between reports and reality blurred

• Overloading managers with data

• Demand uncertainty is a business issue

RQ3: impact of ERP on DM

• ERP not a reliable lens due to gaps

• Use of offline tools distorts picture further

• Vendor driven discourse on integration

• Managers are not data integrity experts

• ERP success is a socio-technical question

• ERP integration is a poor model for DM

ERP fit and data integrity

Fit of ERP to realityLow High

t0

t1

t2

t3

t4

Analysis for ERP project

ERP go-live

Gaps discovered between operations and ERP

Workarounds or changes to business processes

Increasing use of BI, DW and off-line tools

t5

Business model changes in reaction to

external environment

Actions Symptoms

Gaps exist between current processes and ERP best practice

ERP configuration, process re-design

Gaps minimised, data integrity high

Data integrity low(stabilisation phase)

Data integrity high(onwards and upwards phase)

Data integrity low, growing perception of ERP inflexibility

Re-implementation Data integrity high, new gaps emerge

Fit of ERP to realityLow High

t0

t1

t2

t3

t4

Analysis for ERP project

ERP go-live

Gaps discovered between operations and ERP

Workarounds or changes to business processes

Increasing use of BI, DW and off-line tools

t5

Business model changes in reaction to

external environment

Actions Symptoms

Gaps exist between current processes and ERP best practice

ERP configuration, process re-design

Gaps minimised, data integrity high

Data integrity low(stabilisation phase)

Data integrity high(onwards and upwards phase)

Data integrity low, growing perception of ERP inflexibility

Re-implementation Data integrity high, new gaps emerge

Conclusions

• Demand uncertainty undermines ERP

• Assumed data dependencies invalid

• Integrated model cannot partially work

• Integration drives offline data manipulation

• Technical infrastructure complexifies

• Understand nature of information first

Virtual perceptions of the real world

Further thoughts

• ERP model portrays complexity of reality

• Virtualisation creates abberations

• Managers won´t relinquish DM to ERP

• Decoupling to retain human control

• Artefact of management or technology?

• Need to study aims of integration wrt DM

Reading• Mason, 1969

• Child, 1973

• Mason and Swanson, 1979

• Galbraith, 1983

• Zuboff, 1984

• Elmes et al., 2005